Treatment of Depreciation
This query is : Resolved
Rajen Pandya
(Querist)
29 November 2007
Hi,
Wanted to understand the provisions of companies act for depreciation:
If we have purchased any asset, and it is ready to use, but it is not put to use, whether the depreciation should be charged on the same?
For eg., our company has purchased a licenced software to be used in new product. The software cost will be depreciated in the due course.
The product in which it is to be used is under developement, and not yet ready. Hence, the software can also not be used till the time the product is ready.
In such a situation, what is the depreciation treatement for the software licence cost?
Regards,
Rajen
Wanted to understand the provisions of companies act for depreciation:
If we have purchased any asset, and it is ready to use, but it is not put to use, whether the depreciation should be charged on the same?
For eg., our company has purchased a licenced software to be used in new product. The software cost will be depreciated in the due course.
The product in which it is to be used is under developement, and not yet ready. Hence, the software can also not be used till the time the product is ready.
In such a situation, what is the depreciation treatement for the software licence cost?
Regards,
Rajen
Ankur Agarwal
(Expert)
29 November 2007
The software cost has to be depreciated in accordance with the companies act.The "put to use" clause is specified in the Income Tax Act and more so the realisable value of the software will always be less than its cost in the market with due course of time,so it needs to be depreciated.
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